Bank shares on the slide after HBOS revealed bad debts on lending have risen to £1.7bn in the 11 months to the end of November.

The figures could worsen, as they were £1.2bn in September and just £700m in June.

“In light of the worsening economic climate, trends in retail impairment charges are likely to come under further pressure,” HBOS warned.

HBoS shareholders are due to vote today on the merger with Lloyds TSB – and the result looks like a foregone conclusion to go with Government brokered deal.

The shares fell 10% at 78.7p ahead of the meeting in Birmingham.

Lloyds TSB shares also fell by more than 9% to 143.3p.

Royal Bank of Scotland, 58% owned by the state, has dropped 11% to 58.8p.

Barclays, which has turned down government help and raised money from the Middle East instead, is down almost 7% at 150.4p.

Credit card firms and the Government have agreed new consumer safeguards.

The Government had threatened to refer the credit card industry to the Office for Fair Trading if it did not agree to a new code of conduct.

Over the past year, most credit card firms have increased rates despite sharp reductions in the Bank of England base rate.

Cardholders now face an average interest rate of 17.7% on credit cards – more than eight times higher than the base rate – up from 16.6% last year.

The FTSE closed 31 points up last night, climbing 4367 to 4388.

In the US the DOW was down 185 points overnight at 8565, from opening at 8750. Wall Street reacted to the gloom that the Bank of America is laying off up to 35,000 staff, and, the US Senate has failed to reach a bailout deal for the motor industry.

Sterling hit a record low against the euro of 89.39 pence and fell slightly against to $1.4886 against the dollar.

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For More information on specific Banks use these links

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• Barclays
• Capital One
• Child Trust Fund
• First Direct
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• Tesco Savings

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Tags: Bank, Bank of Scotland, Barclays, Credit Card, HBos

The Great VAT Con comes in to effect today – most people believe that a 2.5% cut in VAT from 17.5% to 15% means a £2.50 drop in prices for every £100 spent at the tills.

Let’s demonstrate the con with some basic maths – £100 plus 17.5% is £117.50.

A 2.5% cut in VAT to 15% is not £100 plus £15 equals £115.

Why not? Because that 2.50% cut only chops £2.10 off the price.

So the great giveaway to encourage extra spending is not so great, and worst of all, the Chancellor Alastair Darling has spun the move to make everyone feel better in a bid to loosen purse strings.

The problem is the Government is following the doctrine of Keynesian economics that put us all in this mess in the first place. The great economist John Maynard Keynes talks about the ‘paradox of thrift’.

Basically this means people stop spending and hang on to their cash in a recession because they want liquid assets handy in case they fall on bad financial luck – as if a recession wasn’t bad enough luck.

This makes the recession worse because businesses can’t sell their products, so output declines even more, making the recession worse. The economy is stuck in an ever-decreasing circle until circumstances allow people to spend again. 

That’s why the Government wants us to spend their way out of recession to counteract the paradox of thrift.

The question is, have they done enough to kick-start the economy or will the whirlpool continue to suck in jobs and businesses? One the whole, it looks like too little.

After a week of more bad news in the High Street, with Woolworth’s and MFI going in to administration and B&Q closing nine trade depot superstores, the John Lewis partnership’s weekly trading report shows a continuing downward trend.

For several weeks running, the report has showed a consistent 13% year-on-year fall in sales.

Other big names teetering on the bring are electronics conglomerate Curry’s and PC World after announcing £15 million losses, Clinton Cards, Land of Leather, and DIY giants Focus and Fads. 

The car industry worldwide is gripped by crisis as all the big carmakers in the US, Japan and Europe undertake cost-cutting exercises. 

The ‘nationalisation’ of the Royal Bank of Scotland completed last week, as the taxpayer now owns just less than 60% of the bank.

On the housing front, Nationwide Building Society released figures showing house prices had fallen only 0.4% in November – a 13.9% year-on-year drop.

The markets were a little more forgiving last week.

The FTSE100 continued a slow recovery from the five-year low of 3665 on October 27 to finish last week at 4288 – a rise of 15% over the month.

Wall Street bounced back from 18.5% from a 12-month low of 7449 the previous week to close at 8229 on Friday.

On the money markets, the Pound strengthened slightly to £1.49 against the US dollar. Against the Euro, the Pound moved slightly from £1.18 to £1.19.

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For More information on specific Banks use these link

 

 

• Alliance & Leicester
• Barclays
• Capital One
• Child Trust Fund
• First Direct
• HSBC
• Post Office
• Tesco Savings

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Tags: Alastair Darling, Bank of Scotland, British Pound, Budget, Chancellor of the Exchequer, Nationwide, Tax, Tax Cuts, Tax Payer, Tax Time Bomb, UK Credit Cards, UK economic activity, Uk in recession, UK Recession, VAT

Savers with large amounts of cash on deposit should take action now to protect their money as the credit crunch threatens to sink more banks.

The Financial Services Compensation Scheme (FSCS) underwrites a £35,000 per person per bank repayment guarantee in the event of a crisis.

On the face of it, the FSCS pays out if savers have up to £35,000 squirreled away in a savings account – but rules for receiving compensation are not as straightforward as they seem.

Reading the small print reveals the rules actually say that if a saver has up to £35,000 on deposit in any number of accounts at the same bank, only the first £35,000 of the total amount is protected

Those at particular risk are savers with personal, partnership and business accounts with the same banking groups

FSCS is triggered if a bank, building society or credit union cannot settle or is unlikely to settle claims from savers – providing the institution is authorised under a banking licence in the UK.

The problem is many banks are groups operating on one licence, and although savers may feel their money is safe, they are at real risk of losing a lot of money if the banking group collapses.

In the current dog-eat-dog world of banking, a saver may unwittingly have cash outside FSCS due to a take-over or merger, even though they may know about the scheme’s shortcomings and have already taken action to protect their cash.

Here’s a list of the main banks and financial institution groups that operate under umbrella licenses:

· LloydsTSB, The AA, Bank of Scotland, Halifax, Birmingham Midshires, Intelligent Finance, Saga, Cheltenham and Gloucester

· Nationwide, Cheshire and Derbyshire Building Societies

· Barclays and the Woolwich

· Royal Bank of Scotland and Direct Line

· Clydesdale and Yorkshire Bank

· The Post Office and Bank of Ireland

· Co-op and Smile

· Abbey, Cahoot, Alliance and Leicester and Bradford and Bingley savings accounts

Under FSCS rules, if you have more than £35,000 in a single name or joint names in any of these groups, then disperse the money straight away in to sums of less than £35,000 at banks and building societies operating under separate licenses.

Most other big players like HSBC hold individual banking licenses.

Keep an eye on any cash you may have with the Alliance and Leicester – the Abbey recently swallowed the bank and at the moment they are trading on separate licenses, but this may change at short notice.

The FSCS raises money for compensation from a levy paid by member financial institutions.

Chancellor Alistair Darling has hinted that the £35,000 FSCS limit may go up to £50,000 in the near future.

Banks outside the UK

By law, overseas financial institutions should request Financial Services Authority permission before they open for business in the UK.

Many of these firms are not covered by the FSCS and savers should carefully check the firm’s terms and conditions before depositing money, however good the deal may seem.

The Post Office bank looks a good safe bet for savers as trading is under the same licence as the Bank of Ireland. The Irish government has recently announced all Irish banks are covered by a 100% compensation guarantee.

 

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Tags: Abbey, Alliance and Leicester, Bank of Ireland, Bank of Scotland, Barclays, Birmingham Midshires, Bradford and Bingley, Cahoot, Cheltenham and Gloucester, Cheshire, Clydesdale, Co-op, Derbyshire Building Societies, Direct Line, Halifax, Intelligent Finance, LloydsTSB, Nationwide, Recession, Royal Bank of Scotland, Saga, Savings, savings accounts, Smile, The AA, The Post Office, the Woolwich, Yorkshire Bank